It’s the US government According to former Treasury Secretary Larry Summers The US wants to give its citizens a “significant” tax increase. According to Summers, this is necessary to partially close the $1.4 trillion ($1,400 billion) budget deficit.
In his story for Bloomberg, Summers argues that the U.S. government debt is so enormous that cutting spending isn’t enough. To solve this problem, it is necessary to raise the tax, he said. The question is whether this can still be achieved.
Cutting the budget and raising taxes means the average American’s standard of living is significantly reduced. Unfortunately, this is the reality of a country that has lived in debt for decades.
Now the national debt is slowly but surely reaching a boiling point. In recent years, the US government has been lucky that interest rates have been practically zero. However, we are now dealing with an interest rate of around 5 per cent on new government bonds.
It will take some time for the US government to feel the full pain of this, but slowly but surely a portion of the national debt will be shifted to these higher interest rates. The longer it takes, the more the US government will be in trouble.
Strangely enough, Summers still believes the Federal Reserve should raise interest rates significantly. This will make the situation more difficult for the US government in the long run to solve the debt problem. On the other hand, it may be necessary to stop inflation permanently.
What does this mean for Bitcoin?
This is the main reason why Bitcoin scarcity is so important. The US government is in debt and cannot get out of it. More and more credit is needed to sustain the existing mountain of debt. Over the years, we have also seen the national debt increasing at an ever-increasing rate.
This erodes the purchasing power of the US dollar and prompts investors to seek alternatives. In that sense, Bitcoin’s complete scarcity is an interesting alternative.
A maximum of 21 million units, combined with the decentralized nature of the network, ensures that investors can park their assets in Bitcoin with a sense of relative safety. Over the years, more and more people have seen Bitcoin as a serious alternative to storing fiat money.
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